Portfolio

Basic allocation

The risk limits set by the operation guidelines by the Ministry of Finance are as follows: fixed-income investments must account for at least 35 per cent of the investment portfolio, equity investments may not exceed 55 per cent, other investments may not exceed 12 per cent.

VER’s investments fall into four categories: fixed-income, equities, position management and diversified investments, and alternative investments. Position management and diversified investments were commenced on 1 January 2015. They include operations such as currency hedging and derivative trading, absolute return funds and new types of investment. Alternative investments refer to investments in property, private equity, infrastructure and private credit funds.

While the fixed income instruments and equities in the portfolio can be purchased and sold at will, the liquidity of the investments in alternative investments is partly limited.

When the distribution of investments is determined, due account is taken of the derivative contracts made. The determination is made in accordance with the FSA regulation regarding the distribution of risk as applicable.
 

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Value and return of the investment portfolio

The success of investment activities is analysed on a long-term basis, chiefly via consideration of the portfolio from a broad perspective. The performance of fixed-income and equity portfolios, as well as other investment portfolios, is monitored separately. Relative returns are assessed through comparison of returns with benchmarks set in the investment plan. If necessary, VER may liquidate losses from its investments, should the prospects for a certain investment suddenly change.

The international GIPS standards are applied in the calculation of VER’s returns. This harmonises the various methods of return and risk calculation and renders the figures comparable.
 

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